Phillips Chap 8 Class Slide

Phillips Chap 8 Class Slide - Phillips et al. Chapter 8 A...

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A note is a written contract to pay a specific amount, at a specified rate of interest at some specific future date. Phillips et al. Chapter 8
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$1,200 January 5, 2006 Sixty days after date I promise to pay to Skechers U.S.A., Inc. One thousand two hundred --------------------------------- Dollars Payable at First National Bank Value received with interest at per annum No.              Due  Jones Athletic Company 8563 March 6, 2006 8% Alan Jones Notes Receivable Due Date Interest Rate Term Payee Principal
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Recording Note & Interest On November 1, X1 Jeff”0” loaned $200,000 on a one-year, 10 percent note. Interest is receivable on 4/30, X2, and at maturity on 10/31, X2. Even for maturities less than 1 year, the rate is annualized. Number of months out of twelve that interest period covers.
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Recording Interest Earned $ 200,000 × 10% × 2/12 = $ 1,667 On November 1, X1 Jeff”0” loaned $200,000 on a one-year, 10 percent note. Interest is receivable on 4/30, X2, and at maturity on 10/31, X2.
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Debit Credit Interest receivable 3,334 Interest revenue 3,334 (200,000 x .10 x 2/12) Accounts Dec 31, X1 Entry to Accrue Interest ? Must Record the Interest revenue earned in November & December X1
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Debit Credit Cash 10,000 Interest receivable 3,334 Interest revenue 6,666 Accounts What entry would be made on April 30, X2 to record the interest received ? Must Record the Interest revenue earned from Jan 1 – April 30 X2
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Debit Credit Cash 210,000 Interest revenue 10,000 Note receivable 200,000 Accounts What entry would be made on October 31, X2 to record the note And interest payments received ?
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Phillips Chap 8 Class Slide - Phillips et al. Chapter 8 A...

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